The Cato (CATO) AI Stock Analysis

• Market Cap: $59.64M
• Dividend Yield: N/A
• Average Volume (3M): 57.80K
• Price to Earnings (P/E): ―
• Beta (1Y): 0.66
• Revenue Growth: -1.01%
• EPS Growth: 65.04%
• Country: US
• Employees: 7,000
• Sector: Consumer Cyclical
• Sector Strength: 84
• Industry: Apparel - Retail
• EPS (TTM): -0.28
• Shares Outstanding: 17,984,955
• 10 Day Avg. Volume: 67,079
• 30 Day Avg. Volume: 57,801
• PEG Ratio: 0.20
• Price to Book (P/B): 0.40
• Price to Sales (P/S): 0.10
• P/FCF Ratio: -2.33
• Enterprise Value/Market Cap: 3.22
• Enterprise Value/Revenue: 0.29
• Enterprise Value/Gross Profit: 0.90
• Enterprise Value/Ebitda: 202.84
• 1Y Price Target: N/A
• Price Target Upside: N/A
• Rating Consensus: N/A
• Number of Analyst Covering: 0
• EPS Forecast (FY): N/A
• Revenue Forecast (FY): N/A

• Rating: 42 Neutral
• Price Target: $3.00 ▼(-14.04% Downside)
• Action: Reiterated Date: 02/21/26
• Date: Action: Reiterated 02/21/26

The score is primarily held down by weak financial performance—ongoing losses and negative operating/free cash flow—with rising leverage adding risk. Technical indicators are neutral-to-weak (below key longer-term moving averages and negative MACD), while valuation support is limited by a negative P/E and no dividend data.

Positive Factors

Gross Margin Stability

A stable gross margin around 32% provides a durable cushion for the business model: it suggests product pricing and cost of goods control remain intact. Over 2–6 months this supports operational recovery potential if SG&A leverage and volumes improve, enabling faster return to profitability.

Modest Revenue Growth

Positive TTM revenue growth indicates the company is regaining top-line traction rather than contracting. Even modest, persistent revenue growth aids operating leverage in apparel retail, making margin recovery and fixed-cost absorption more achievable over the medium term if sustained.

Manageable Solvency

Debt near parity with equity implies solvency is manageable today and the balance sheet can support operations or strategic action without immediate distress. This structural flexibility gives management runway to execute turnarounds or refinance if cash generation improves.

Negative Factors

Negative Cash Flow

Persistent negative operating and free cash flow is the primary structural weakness: it erodes liquidity and forces reliance on external financing or asset adjustments. Over months this limits reinvestment, raises refinancing risk, and constrains the firm's ability to fund a durable recovery without capital infusions.

Ongoing Losses

Continued net losses and negative margins reduce retained capital and weaken competitive positioning. Without sustained margin expansion or stronger revenue growth, losses will persist, limiting capacity to invest in merchandising, marketing, or omnichannel improvements needed for structural recovery.

Rising Leverage

Leverage increasing versus prior years raises financial risk while profitability is weak. Higher debt relative to equity increases interest and covenant pressure, narrowing strategic options and making the firm more vulnerable to cash-flow shortfalls across the next 2–6 months absent material operational improvement.

The Cato Business Overview & Revenue Model

Company Description

The Cato (CATO) is a leading retailer specializing in women's fashion, offering a wide range of apparel, accessories, and footwear. The company operates in the retail sector, focusing on providing stylish and affordable clothing options for women of all ages. With a robust brick-and-mortar presence complemented by an online store, The Cato aims to deliver a seamless shopping experience characterized by quality products and excellent customer service.

How the Company Makes Money

The Cato generates revenue primarily through the sale of its apparel and accessories in its physical stores and online platform. The key revenue streams include direct sales from their retail locations, e-commerce transactions, and seasonal promotions that boost sales volume. Additionally, The Cato capitalizes on strategic partnerships with suppliers and manufacturers to optimize inventory costs and enhance product offerings. The company also engages in loyalty programs that encourage repeat purchases, contributing to a stable revenue flow.

The Cato Financial Statement Overview

Summary

Mixed fundamentals: modest TTM revenue growth and slightly improved profitability trends, but the company is still operating at a loss and cash flow is the key weakness (negative operating and free cash flow). Balance sheet solvency appears manageable, though leverage has increased and returns remain negative.

Income Statement

TTM (Trailing-Twelve-Months) revenue is modestly higher (+1.4%), and gross margin has held fairly steady (~32%). However, profitability remains weak: the company is still losing money (net margin about -1.5%) with operating profit negative, even though results improved versus the last annual period (smaller loss and EBITDA turning slightly positive). The longer view shows a sharp step-down from 2022 profitability to mostly losses in 2024–TTM, highlighting an uneven earnings recovery.

Balance Sheet

Leverage is moderate but notable, with debt roughly in line with equity (debt-to-equity ~0.95 in TTM), up versus prior years, which reduces flexibility. Equity remains positive and the asset base is stable, but negative returns on equity in TTM and the last two annual periods reflect that the balance sheet is not currently generating acceptable shareholder returns. Overall, solvency looks manageable, but rising leverage alongside losses is a clear risk.

Cash Flow

Cash generation is the main pressure point: TTM operating cash flow is negative and free cash flow is also negative, and free cash flow has deteriorated sharply versus the prior annual period. While the accounting loss is relatively small in TTM, cash burn indicates working-capital and/or ongoing investment needs are outweighing operating profitability. The company did produce strong cash flow in 2022, but the trend since then has weakened materially.

Breakdown	TTM	Jan 2025	Jan 2024	Jan 2023	Jan 2022	Jan 2021
Income Statement
Total Revenue	660.06M	649.81M	708.06M	759.26M	769.27M	575.11M
Gross Profit	212.66M	203.55M	233.88M	238.52M	303.85M	127.24M
EBITDA	946.00K	-6.24M	-3.90M	12.94M	51.39M	-57.94M
Net Income	-9.61M	-18.61M	-22.59M	41.00K	34.91M	-45.39M
Balance Sheet
Total Assets	450.23M	452.36M	486.82M	553.14M	633.77M	591.45M
Cash, Cash Equivalents and Short-Term Investments	78.97M	77.70M	102.95M	128.66M	165.76M	143.93M
Total Debt	159.98M	145.90M	153.12M	174.77M	184.33M	206.74M
Total Liabilities	282.59M	290.06M	294.50M	326.55M	379.57M	344.95M
Stockholders Equity	167.64M	162.30M	192.32M	226.59M	254.20M	246.50M
Cash Flow
Free Cash Flow	-7.49M	-27.62M	-12.05M	-6.06M	55.68M	-44.67M
Operating Cash Flow	-3.23M	-19.75M	477.00K	13.37M	59.79M	-30.71M
Investing Cash Flow	7.44M	28.96M	19.78M	16.02M	-25.33M	64.51M
Financing Cash Flow	-2.33M	-14.05M	-16.13M	-29.28M	-31.80M	-27.18M

The Cato Technical Analysis

• Technical Analysis Sentiment: Negative
• Last Price: 3.49
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Negative
• MACD: Negative
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For CATO, the sentiment is Negative. The current price of 3.49 is above the 20-day moving average (MA) of 3.06, above the 50-day MA of 3.17, and above the 200-day MA of 3.37, indicating a bearish trend. The MACD of -0.06 indicates Negative momentum. The RSI at 44.37 is Neutral, neither overbought nor oversold. The STOCH value of 52.96 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for CATO.

The Cato Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
Sector *	61 Neutral	$18.38B	12.79	-2.54%	3.03%	1.52%	-15.83%
LVLU	55 Neutral	$43.63M	-0.96	-195.23%	―	-12.10%	-44.14%
DLTH	49 Neutral	$83.74M	-2.50	-17.04%	―	-6.40%	11.65%
TLYS	48 Neutral	$42.05M	-1.25	-34.77%	―	-8.31%	36.10%
DXLG	46 Neutral	$30.27M	-3.75	-5.41%	―	-8.83%	-186.80%
RENT	45 Neutral	$214.70M	-5.19	―	―	2.91%	94.12%
CATO	42 Neutral	$59.64M	-6.57	-5.58%	―	-1.01%	65.04%